Peugeot Sells Part of its Assets to Raise Money

PSA Peugeot Citroen will sell 75% of the Gefco truck unit for 800 million euro to OAO Russian Railways, a necessary measure to reduce debt.

As part of the deal, Gefco will also offer Peugeot a special dividend of 100 million euro. The agreement waits for the regulatory approval, and if everything goes as planned the two companies will close the deal by the end of the year.

“Peugeot still burns about 100 million euros in cash per month, so this could help them live for about eight months,” said Xavier Caroen, a Kepler Capital Markets SA analyst with a buy rating on the shares.

Peugeot also has to deal with increasing pressure from ratings services, as the company struggles with overcapacity in Europe and continuous loses in the region. In February the automaker announced it plans to sell assets, such as Gefco, to cut costs. Russian Railways Chief Executive Officer Vladimir Yakunin said that buying part of Gefco is part of the effort to keep up with competitors, such as Berlin-based Deutsche Bahn AG, in developing a logistics arm alongside infrastructure and train operations.

After 116 years in the auto market, Peugeot now plans to cut 8,000 jobs in France and close a plant near Paris to cut costs. Earlier this year the automaker has issued 1 billion euro in new shares and also sold a stake to GM, to raise cash.